How to afford a fun life

So, how much should the average young Canadian be saving—and already have saved—in order to plan ahead for the future and lead a fun life? Join us as we explore how to save money fast, allowing you to afford the fun experiences you crave.

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How much young Canadians should save for the future

Saving for the future is a crucial part of financial planning, but the recommended savings benchmarks may seem out of reach for many Canadians. According to the National Bank of Canada, by 35, Canadians should have saved the equivalent of their annual salary for retirement. And if that ship has sailed, and you’re still on the younger side of 30, the recommended catch-up plan is to save 18% of your earnings from age 30.

I spoke to Certified Financial Planner Sam Lichtman, who is the founder of Millen Wealth Advisors, a wealth management firm helping millennials thrive financially, who echoes that approach but with some real-world caveats.

That 18% number sits between what Lichtman recommends: “10% is a minimum to start to save, and 20% is ideal. But there are some real-life limitations to that. If you start making $45,000 a year and move out of the house because you’re making money, the least you’ll pay for rent right now is probably $1,500. If you have student debt or any other fixed obligation, you’ll have a hard time saving 20%, even living on ramen noodles.” 

Experts suggest saving a minimum of 10% to kickstart the money-saving habit. Then, as you establish an emergency fund, “Look at investing the rest of that back into skills and things that can help you make more money down the road.”

Lichtman doesn’t sugarcoat what he says to his millennial clients and his social media following. He says about half of the comments from his 90K social followers are baffled by the notion of saving money in the current climate and that they feel “hopeless.” His pragmatic response is that they are likely in one of two camps: either their hands are tied and they are not in a position to save quite yet; or, more likely, their finances are tight but can improve with some smart strategies.

Lichtman says for those in the former position, “You have to ask yourself what more you’re willing to do to change your scenario, such as pursuing a side hustle or second source of income.” For everyone else, it’s time to get under the hood of your spending and learn how to save money fast with the help of the pros.

How to save when you’re on a low income in Canada

A fun life begins with a plan, which doesn’t sound like fun but it works. 

When managing your finances, consider things such as paying down debt, establishing an emergency fund, saving for the future and creating a fund for discretionary costs, also known as a fun or sinking fund.

1. Build an emergency fund

Before the fun fund, Lichtman says to prioritize an emergency fund. An emergency fund is strictly for worst-case scenarios such as job loss, unexpected car or home repairs (not renovations), or medical, dental and vet bills. Most financial experts recommend saving three to six months of expenses. Experts suggest three months of savings if job security is high, but try for six months if you’re self-employed or your job security is uncertain. 

2. Pay off high-interest debt

Next, it’s essential to focus on managing credit card debt. According to a report from StatCan, Canadians aged 35 and younger carry an average of $2,000 for credit cards and instalment payments and $12,500 for student loans. Their total debt average is $19,000, which includes other bills and obligations, such as car loans and lines of credit.

It’s best to focus on clearing debt (credit cards, student loans etc.) before putting money toward long-term investing in a registered retirement savings plan (RRSP) or tax-free savings account (TFSA). Retirement plans can wait. “Don’t worry about putting money into your TFSA or RRSPs at this point because we need to zero in and focus on one thing,” Lichtman explains. “If you have three credit cards and want to pay off all three simultaneously, it’s unrealistic. Pay off one first and then get to the other two.”

3. Build a sinking fund

Now for the good part: how to save money fast for a fun life. If you’re like most people, you’ll have to reverse how you currently afford entertainment. Lichtman says the key is calculating and separating your fun fund upfront. 

Regardless of income, having a clear plan for both fixed and discretionary expenses is key. For example, suppose a household has $6,000 in income and $4,000 in fixed costs. In that case, Lichtman helps them allocate the remaining $2,000 for discretionary spending at the beginning of the month—covering spending on groceries, dining out, food delivery, coffee and entertainment. This proactive approach allows for better financial management. 

Choose a high-interest savings account (HISA) for your sinking fund. That way, you can earn interest on your savings (and interest on the interest—that’s called compound interest. Check out MoneySense’s compound interest calculator). It’s also a good option for your emergency fund. Just keep the accounts separate. 

Money-saving tips

So, let’s take the above scenario and assume you have $2,000 for discretionary spending and remove non-negotiables like groceries. If you typically spend $1,000 monthly on groceries (the average monthly spend on groceries in Canada was $1,357.37 in 2023), you have $1,000 left for eating out, personal expenses and leisure experiences. 

If you decide to allocate $500 for fun, “Instead of waiting for that money to be available at the end of the month, move it the second you get paid into an account designated for entertainment,” advises Lichtman.

The best way to save money for a fun goal is to examine your discretionary pile. Disposable income is where mindless spending can happen. But with careful examination, you’ll uncover hidden savings to reallocate towards something more meaningful. Look back at your discretionary spending for at least three months and see where every dollar was spent.

“Look at your credit cards, bank statements—everything—and find out where your money is going,” says Lichtman.

If you spent $75 at Starbucks last month, and the average cup of coffee is $4, can you cut that down to two coffees a week for a total of $32 instead? It’s not about shaming you buying coffee but deciding where to put your money. If you don’t drink coffee, what other things do you buy out of “convenience?” Can you reduce how much you spend on that in half? (Check out MoneySense’s free and downloadable budget template.)

“Analyze cash flow. Make sure that you know where your money is going. You can’t control what you can’t track,” says Lichtman. Look at what else you can easily cut out of your budget, for say $50 a week in savings. When it comes to how to save money fast, looking closely at discretionary spending is where it’s at. 

Frugal living: have more fun on less money

Ask yourself, “What does fun truly mean for me?” It may seem obvious, but when did you last reflect on what brings you genuine joy? Are you simply following the routine of happy hour drinks because it’s what you’ve always done to unwind, only to wake up groggy, hungover, and $100 poorer the next day? Stop wasting money on activities that no longer bring you joy. (Read: Does money buy happiness?)

Make a list of leisure activities you get a noticeable lift from. Maybe it’s spending time at the dog park with friends, hiking some of Canada’s jaw-dropping national parks, checking out seasonal festivals and events, catching a concert or theatre play or exploring a new pocket of your city.

Try this: List your top 10 activities that spark joy for you and break them into three categories: 

1. Cheap or free

2. Affordable 

3. Splurge 

If a weekend getaway or vacation is on your splurge list for later this year, select activities from the inexpensive category more often while you build up your fun fund for that coveted vacation.

How to earn and redeem credit card and loyalty rewards 

Whatever you do, don’t sleep on the untapped potential of loyalty programs, such as travel rewards and credit card points or cash back programs, that allow you to earn on purchases you would have made anyway, such as groceries, rideshares (which includes Uber rides) and gas.

With the right loyalty program, you can accumulate points fast, which you can use for travel and experiences. Katherine Carl-Musson, head of marketing at Air Miles, explains that Air Miles mirrors consumer behaviour—meaning the loyalty program doesn’t dictate where consumers shop, but rewards them for shopping where they already do. 

Her top tips for racking up points fast? Stay informed about ongoing promotions, explore card-linked offers, and take advantage of bonus mile opportunities. Stay engaged and “play the game” by watching your credit card app, website and emails, and get savvy about stacking and double-dipping reward opportunities. 

Saving money for a big friends trip, that new cell phone, whatever

By prioritizing your finances and prioritizing how you use your money, you’ll be saving for that fun life in no time. Plus, when you finally do use the sinking fund, you will also enjoy not having to pay interest on it either. In fact, you might even earn interest on interest if you use a HISA.

More from MoneyFlex:

• 10 SMART financial goals
• The best way to save for retirement in your 20s
• Travel hacks to help you save money on your next trip
• How to negotiate a higher salary and come out winning

About Alicia Tyler

The Toronto-based journalist has more than 18 years of experience as an editorial leader in digital and print media, specializing in consumer and service journalism. Her work has appeared in Clean Eating, Flare and more.

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